Borders Stages Massive Sale…On Its Stock

By Eric Savitz

The retail book chain’s shares today are down dramatically, one day after a disappointing earnings report from rival Barnes & Noble(BKS).
Back in March, Borders hired Merrill Lynch and J.P. Morgan to seek a buyer for the company; the most obvious acquirer would have been Barnes & Noble. But it hardly seems likely that Barnes & Noble can buy Borders in the current environment.

Barnes & Noble yesterday said it suffered a 7.4% same-store sales drop in Q3, and it forecast a 6%-9% drop in same-store sales for Q4.

Borders is scheduled to report October quarter results on Tuesday; it is hard to imagine why they would be a whole lot better than Barnes & Noble’s results.

All this turmoil in the offline book retailing business would potentially be good news for Amazon.com(AMZN). On the one hand, you could argue that people are now simply buying fewer books through any channel. On the other hand, you could take the position that book buyers are shifting purchases to the Web.

Borders shares today have tumbled 52 cents, or 38%, to 85 cents. That follows declines of 41 cents Thursday and 30 cents on Wednesday; the stock is off 58% over the three days.

Borders online sales are misleading because Borders Stores utilize their online webstore to place in-store orders. So while figures look as if customers are people are shopping at Borders.com, actually Borders.com is being used by sales associates to fulfill merchandise requests. Borders has cut its titlebase so drastically, that "special orders" which were once a courtesy, are now a necessity. Borders is presenting a inflated picture of their online sales.

NOVEMBER 21, 2008 5:32 P.M.

x wrote:

This is the end for Borders.

NOVEMBER 21, 2008 5:32 P.M.

x wrote:

Borders will file for bankrupcy after Jan 1st.

NOVEMBER 21, 2008 6:34 P.M.

y wrote:

Stores will begin closing in the near future. All stores in TN and TX will close this January. With a cascade of stores closing in other states.

NOVEMBER 22, 2008 1:06 A.M.

art wrote:

Borders is a nice environment to select books while having a cup of coffee. It would be a shame to see this concept fail.

NOVEMBER 22, 2008 8:36 A.M.

Lilly wrote:

Borders online sales increase of 500% is due to the fact that Borders did not have an online site until this past spring. Before then, they were partners w/ Amazon and they had ZERO online presence. That is why their online traffic is up 500%. Plus, it is traffic, not purchases that are up.

NOVEMBER 22, 2008 8:44 A.M.

Mario Ex Employee wrote:

Cant blame consumers for not wanting to spend time in such disorganized retail environments. You can just feel the lack of caring by 90% of staff. Glad to be off that sinking ship.

NOVEMBER 23, 2008 2:50 P.M.

Carls wrote:

There are probably lots of reasons - but for me and my friends it is the loud and awful and incessant music (?) that plays at a volume that means you can't really look at books...

Why don't the big surface shops take a lesson from the boutique stores and turn off the loud ... (hard to call it music).

NOVEMBER 23, 2008 3:43 P.M.

borders slave wrote:

Lilly has it nailed about the website--smoke and mirrors. i thought the bankruptcy would come at the end of the fiscal year (late jan) but with the stock likely to continue to tank below a $1, there might be a bigger announcement than expected on wednesday's conference call.

NOVEMBER 24, 2008 6:28 P.M.

Hum wrote:

Well, while every claims doom and gloom, when looking at B&N, they've lost nearly as much of their value per share as BGP. If I had bought $1000 in bgp shares Friday, I'd have $2000 today.....I think they'll hang in there.

NOVEMBER 25, 2008 10:20 A.M.

happy to be here wrote:

I have been with the co 10 years and have full faith in the co and turnaround actions taken...we are here to stay and getting better everyday

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.